Bone marrow smears of 263 protocol patients with acute nonlymphoblastic leukemia (ANLL) and related disorders treated between 1970 and 1978 at MSKCC were reviewed blindly by two pairs of hematomorphologists and classified according to the FAB system. It was found necessary to add one category (MO) for acute undifferentiated leukemia and to define more precise quantitative criteria for the categories M1-M6 based on bone marrow differential counts. Using this modified FAB classification, agreement between the two observer groups based on morphology alone was 69%. Cytochemical stains were essential in establishing the diagnosis in 9%, led to a change of diagnosis by one observer team in 14%, and helped to confirm the diagnosis in 32% of cases. Complete remission rates, remission duration, and survival were not significantly different among diagnostic categories. Myelodysplastic syndromes (MDS: M6, RAEB, CMML; CR rate 48%) and ANLL without differentiation (M0, M1, M5a; CR rate 50%) appeared to do less well than ANLL with partial differentiation (M2, M3, M4, M5b; CR rate 59%) on all three protocols studied. Auer rods were present in 53% of all cases with 63% in the myeloid categories (M1-M4). Auer rods were found to be the single most important prognostic parameter in this study, with a complete remission (CR) rate of 68% in the Auer-rod- positive and of 40% in the Auer-rod-negative group (p < 0.0001). Survival was significantly longer for patients exhibiting Auer rods (p < 0.0002). Median survival for the total group was 13.5 mo and median remission duration for responders was 11.5 mo in the Auer-rod-positive group compared to 6.2 mo median survival and 9.2 mo median remission duration for the Auer-rod-negative group.